Several years ago, in anticipation of expecting our first child, my wife and I began searching for the perfect new home. Being high school sweethearts, we wanted to raise our little one in Exeter, our old stomping grounds! We wanted something safe, affordable and close to downtown. But affordability can be a bit elusive; there’s more to consider than just the mortgage. Anticipated ancillaries should include utilities, insurance, cable, etc. But we weren’t really prepared for one of the largest additional expenses…property tax.
We love New Hampshire. It has all the seasons: the summer is second to none, the beauty of fall foliage is something out of a story book and winter is a wonderland (most of the time). There’s also no state income tax or sales tax! But of course, even the live free or die state needs its tax revenue, which it gets primarily through property tax. According to a survey done by wallethub.com, NH is ranked 3rd for the nation’s highest property taxes.
Property taxes vary across the state. New Hampshire determines your property tax by estimating the fair market value (FMV) of your home. Your FMV is then multiplied by your town’s mill rate. Derived from the Latin word for “thousandth”, the mill or millage rate is a figure representing how much you owe per thousand of FMV. Here’s an example: the mill rate of Salem, NH is $28.84. A property with $250,000 of FMV would owe $7,210 in annual property tax (($250,000 / $1,000) x $28.84).
By now you are probably saying, “Ok AJ, we get it, we pay through the nose to own a home in NH, so what?” When you’re raising a family, and want your kids to be in a good school district, your options may be limited. But when you retire, the kids are grown and the commute to work is irrelevant, so a strategic move might yield major savings.
People are often drawn to a specific geographic area of the state: the views of the seacoast, the beauty of the north country, the farmland in the valley, the leisure of the lakes region, etc. could be the seacoast, the north country, etc. My hometown of Exeter has a mill rate of $26.77, so a $250,000 home value would come with a $6,693 annual property tax bill. But when we retire, we could move to nearby Hampton with a current mill rate of $16.37. A similar home would only have a $4,093 annual tax obligation. That’s a $2,600 savings for moving 15 miles down the road!
Clients often complain that it’s difficult to find cost effective downsizing opportunities these days. While that might be true, there is ample opportunity to reduce property tax. Additionally, MA residents may want to consider a move to the Granite State since it does not assess state income tax. MA may have a reputation for cheaper property taxes, but we find that not to always be the case, depending on the towns being compared.
When you’re on a fixed income, every dollar counts. To see how you might be able to lower or eliminate property and/or state income tax schedule a consultation with Arcadia Financial Group today!
Mill rate examples:
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